Question

the rate at which rbi lends to banks for short periods of time i known as

Answer 1

This rate is known as the Reserve repo rate. It is the rate at which banks lend money to RBI.

The terms “Repo Rate” is often used in the service providing industry of banking.

Repo rate is the" interest charged by the RBI in regard to the repurchasing of securities sold by the commercial banks"

There is another common term used in this sector, i.e. of Reverse Repo Rate. "Which is the interest rate given by the RBI to commercial banks depositing their excess funds in the Central Bank of that place."

In regard to current news in India, the RBI rate was hiked to repo rate by 25 basis points.

Answer 2

The rate at which ‘RBI lends to banks’ for short periods of time is known as Repo Rate.

Explanation:

• When the RBI lends to banks for a short time it is called the Repo rate. The commercial banks borrow money from the ‘RBI by selling their securities’ to them.  

• It is an ‘important tool’ used by the RBI for keeping ‘inflation under control’.

• ‘Repo rate’ is the short form for repurchase rate where the commercial banks sell their surplus ‘government securities’ to RBI.

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